LNG tankers divert to China as winter gas shortage bites

Reuters are reporting that LNG is being re-exported to China from Japan and tankers are being diverted from as far away as Brazil, with traders rushing to find cargoes in the face of a supply crunch in the world’s second largest economy as winter bites.

Following an unprecedented drive to switch millions of households to natural gas from coal for heating, China’s imports of LNG have surged as utilities struggle to meet soaring demand as winter gets off to a colder start than usual.

Chinese imports now include cargoes from Japan, itself by far the world’s biggest consumer of LNG, and which is also entering winter.

The 150 000 m3 Neo Energy left Japan’s Shimizu terminal on 1 December and delivered LNG this week to the FSRU Cape Ann, which is sitting outside the port of Tianjin in eastern China.

This Chinese demand has pushed up spot LNG prices LNG-AS by more than 80% from their 2017 lows to above US$10 per mmBtu, a January 2015 high.

That puts spot prices significantly above LNG prices linked to the price of Brent crude oil, which are trading around US$8 per mmBtu.

The urgent need for spot cargoes has also boosted rates for LNG tankers.

The daily rate for a 160 000 m3 LNG tanker has shot up to US$80 000 this month from a 2017 low of US$30 000 in April.

This has led to a jump in share prices of listed LNG tanker owners like Gaslog and Teekay LNG Partners.

Thanks to much lower prices in the America’s, LNG cargoes are also coming from across the Pacific.

The 147 000 m3 Esshu Maru tanker was initially scheduled to deliver US LNG from Cheniere Energy’s Sabine Pass to Pecem in Brazil on 22 December, but it was diverted to the Pacific, passing the Panama Canal this week.

Another LNG tanker, the 148 000 m3 Gaslog Santiago, had been making supply runs in the Americas in the past month, but is about to enter the Panama Canal and then the Pacific Basin for the first time in at least half a year.

Cold weather is also dominating Japan and South Korea, meaning by far the world’s three biggest LNG importers are seeing a winter demand spike, which will likely support LNG prices for the coming months.